Incidents:
On February 7, 2024, the company announced FY2024Q3 financial report (corresponding to the natural year 2023Q4), achieving operating income of 260.3 billion yuan (YoY +5%, QoQ +16%); operating profit of 22.5 billion yuan (YoY -36%, QoQ -33%), adjusted EBITDA of 59.6 billion yuan (YoY +1%, QoQ +21%), net profit of 10.7 billion yuan (YoY -77%, QoQ -60%), net profit of 14.4 billion yuan (YoY -69%, QoQ -48%), non-GAAP net profit of $48 billion (YoY -4%, QoQ +19%). Alibaba announced an expansion of share repurchases of 25 billion US dollars, increasing the total repurchase scale to 65 billion US dollars. The validity period of the upgraded share repurchase plan will be extended until the end of March 2027, and there will also be a share repurchase amount of 35.3 billion US dollars in the next three fiscal years; in the quarter ending December 31, 2023, the company repurchased a total of 292.7 million shares of common shares with a total of 9.5 billion US dollars. In the 2023 natural year, shares issued under the employee stock ownership plan have been taken into account Since then, Alibaba's share repurchase program has reduced tradable shares by a net of 3.3%.
Our point of view:
Taotian Group: 2023Q4 revenue increased 2% year over year to 129.1 billion yuan, of which 1) China's retail business achieved revenue of 123.8 billion yuan (YoY +1%). Among them, ① the customer management business achieved revenue of 92.1 billion yuan (YoY +0.5%), mainly due to Taobao and Tmall's healthy year-on-year growth in online GMV (excluding unpaid orders), partially offset by a decline in the overall monetization rate (increase in GMV of Taobao merchants); ② direct management and other businesses achieved revenue of 316 billion yuan (YoY +2%); 2) China's wholesale business achieved revenue of 5.3 billion yuan (YoY +23%), mainly due to the increase in value-added service revenue for paid members.
Ali International Digital Business Group: 2023Q4 revenue increased 44% year over year to 28.5 billion yuan, of which 1) cross-border and global retail businesses achieved revenue of 23.3 billion yuan (YoY +56%), mainly due to strong growth in overall retail orders, as well as an increase in revenue contributions and monetization rates from AliExpress Choice, driven by the steady performance of major retail platforms; 2) Cross-border and global wholesale businesses achieved revenue of 5.3 billion yuan (YoY +8%), mainly due to increased revenue from value-added services related to cross-border business.
Local Life Group: 2023Q4 revenue increased 13% year over year to 15.2 billion yuan, and overall order volume increased by more than 20% year on year this quarter. In the 12 months ended December 31, 2023, Local Life Group reached more than 370 million annual active consumers.
Cainiao Group: 2023Q4 revenue increased 24% year over year to 28.5 billion yuan, mainly driven by revenue from cross-border logistics fulfillment solutions. The number of orders for the global 5-day premium logistics service achieved a three-digit month-on-month increase this quarter.
Cloud Intelligence Group: 2023Q4 revenue increased 3% year-on-year to 28.1 billion yuan. The adjusted EbitaMargin was 8%. The continuous increase in adjusted EBITDA reflects that the Group's product structure has been improved by focusing on public cloud business and improving operational efficiency, and the profitability of the cloud business is expected to continue to increase.
Profit forecast and investment rating: Considering that the company is in a business adjustment period and will continue to increase investment in Taotian Group and overseas business in the future, we adjusted the company's FY2024-FY 2026 revenue to be 9463/10,282/1113 billion yuan, net profit to mother of 946/1,110/126.7 billion yuan, corresponding diluted EPS was 4.5/5.3/6.0 yuan, and the corresponding P/E was 14/12/11 times; according to the SOTP valuation method, we gave Alibaba for fiscal year 2025 The total target market value is RMB 2129.6 billion, corresponding to the target price of HK$114, maintaining a “buy” rating.
Risk warning: the development of Sino-US relations falls short of expectations; consumption recovery falls short of expectations; the risk of policy supervision and valuation adjustments in the Internet industry; increased market competition, industry growth falls short of expectations; the effects of organizational adjustments fall short of expected risks, etc.